38 Studios’ Downfall Gamasutra Report

Gamasutra’s Leigh Alexander has penned a very interesting report on 38 Studios and Big Huge Games’ financial woes and last days, with testimonies coming from anonymous developers at the two studios. They argue, among other things, that Governor Chafee spread lies and disinformation about the company’s financial situation, that Schilling was apparently a victim of his own naivete and the incompetence of 38 Studios’ executives, and that Project Copernicus was actually a lot further in development than we’ve been lead to believe by the footage and screenshots available so far. As a result of that, it also comes off as a one-sided report, so that should be kept in mind.

Here’s a generous excerpt:

“I don’t know how feasible [Copernicus] ever was, but it seemed to have modest expectations it would be able to achieve,” says one former Big Huge Games employee. “Once things went bad, Chafee’s office started leaking any information it could to make 38 Studios look like it had been a bad deal… unfortunately, a lot of these leaks involved partial and complete misinformation.”

A 38 Studios employee corroborates, pointing out some of what he says are Chafee’s most egregious acts of misinformation: Calling a private loan effectively cosigned by the state “taxpayer money” makes it appear that the state has already paid the cost, instead of being responsible for it in the event of failure.

And the highly-publicized million-dollar payment wasn’t a loan payment as Chafee claimed, states the employee: “It was actually a weird extra fee to the board he was on, which had nothing to do with payments and interest — [which was] already handled by setting aside a full third of the loan for that purpose,” he adds. “This made it seem like we had somehow burned through all $75 million, including the money set aside to do this.”

Chafee also publicly claimed 38’s first release, the single-player RPG Kingdoms of Amalur: Reckoning, “failed,” artificially deflating its sales numbers and suggesting it was a commercial flop — which it wasn’t. It’s true that the game didn’t sell enough to fulfill a clause whereby publisher Electronic Arts would start paying a cut to the studio, but employees say potential profits for Reckoning were never part of the budgeting plans for 38.

Most importantly, employees say Chafee’s public statements about possible solvency issues for the 38 Studio teams in the first place caused potential investors who might have given teams the funding to continue development to distance themselves. In a funding scheme that relies on continually forging investor partnerships, employees believe this might have been the most damning act.

Bad press about supposedly-poor Reckoning sales, potential insolvency, and a demand for an audit — even though a regular audit process was conditional to the loan — are thought by employees to be the reason no investors emerged and why those in talks got spooked and left the table.

“As a result of all of the negative publicity and misinformation, the publishers we were talking with ended up distancing themselves from us and letting us collapse,” says a Big Huge Games employee. “In a real way, Chafee’s political maneuvering is responsible for the lost jobs of 107 entirely blameless professionals in Maryland [where Big Huge was based].”